The opinion of Judge Walker in the case of In re Williams (Williams v. American Education Service, et al,), 2013 Bankr. LEXIS 2050, Adv. Proc. No. 12-5059 (Bankr. M.D. Ga. May 13, 2013) is a good example of the standard that must be met to discharge student loans. Debtor’s must not only demonstrate “undue hardship” as required under 11 U.S.C. § 523(a)(8), they must demonstrate a “certainty of hopelessness” for the future.
Debtor alleged that her government insured educational loans, totaling $29,593.92 and dating back as far as 1996, should be discharged based upon “undue hardship.” The summary of the facts show that Debtor’s take-home pay was $1,542 per month from her job as a municipal bus driver. She is financially responsible for her adult child, who apparently has severe emotional disorders. Her son receives social security, including a lump sum for back payments, but Debtor is required to spend the money only for the benefit of her son. In addition, in 2010, Debtor was diagnosed with an eye disorder, with a growth in her eye that could not be removed until it matured in 2011. There is some question about her ability to retain her certification as a bus driver based upon her impaired vision.
Debtor’s expenses, after consideration of her son’s social security payments and his expenses, leaves Debtor with a surplus of $53 per month. Under the income-based repayment plan for student loans, Debtor’s payment would be little or nothing.
The Court began the analysis by reviewing the standard for the discharge of educational loans.
The Eleventh Circuit has adopted the three-prong Brunner test for determining whether repayment of student loans will impose an undue hardship:
(1)… the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans; (2) … additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) … the debtor has made good faith efforts to repay the loans.
Hemar Ins. Corp. v. Cox (In re Cox), 338 F.3d 1238, 1241 (11th Cir. 2003) (quoting Brunner v. New York State Higher Educ. Servs. Corp.), 831 F.2d 395, 396 (2d Cir. 1987)). The burden is on Debtor to prove each prong of the Brunner test by a preponderance of the evidence. Douglas v. Educational Credit Mgmt. Corp. (In re Douglas), 366 B.R. 241, 252 (Bankr. M.D. Ga. 2007).
Brunner requires more than a mere present inability to repay student loans; instead, the debtor must demonstrate a “‘certainty of hopelessness‘ that the debtor will be able to repay the loans within the repayment period[.]” Educational Credit Mgmt. Corp. v. Mosley (In re Mosley), 494 F.3d 1320, 1326 (11th Cir. 2007). This results in a high standard such that a discharge of student loans may be obtained only in “the most dire circumstances.” Educational Credit Mgmt. Corp. v. Frushour (In re Frushour), 433 F.3d 393, 399 (4th Cir. 2005). As the court in Cox explained:
The government is not twisting the arms of potential students. The decision of whether or not to borrow for a college education lies with the individual; absent an expression to the contrary, the government does not guarantee the student’s future financial success. If the leveraged investment of an education does not generate the return the borrower anticipated, the student, not the taxpayers, must accept the consequences of the decision to borrow.
The Court found that the Debtor met the first prong, that she cannot meet a “minimal standard of living” if she is forced to repay her loans, given that she has virtually no surplus after paying her necessary expenses.
The second prong, that “additional circumstances exist indicating that state of affairs is likely to persist for a significant portion of the repayment period,” required what the Eleventh Circuit stated to be a “certainty of hopelessness.” The Court found two such “additional circumstances” exist in this case: 1) the needs of Debtor’s son, and 2) her vision impairment and the possible effect on her employment. For the first “circumstance,” the Court found that Debtor will have a little more disposable income when her son moves to a facility that will provide care. In addition, Debtor will pay off her car loan and have an additional $260 per month. As far as her future employment, while the Debtor may be correct in believing her future employment as a bus driver may be at risk, she did not demonstrate that she would be unable to work in another capacity. A mere speculative decline in income does not meet the Brunner test.
Although Debtor’s employment prospects are likely limited due to her age and obsolete education, she has demonstrated an ability to shift careers from mechanics to bus driving. She has further demonstrated an ability to maintain steady employment for the past 23 years, interrupted only by the need for eye surgery. For these reasons, as well as her anticipated decrease in expenses, the Courts finds Debtor failed to carry her burden to prove additional circumstances likely to persist for the duration of the loan repayment period.
The Court found that the Debtor met the third prong of the Brunner test, the “good faith” requirement, but because she did not meet the second prong, her educational debt was non-dischargeable.
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